Contract analysis

I. Executive Summary This Memorandum sets forth the results of our post-bind policy wording review of the final issued Directors & Officers ("D&O") liability insurance policy forms for the Nexford Industrial Holdings Inc. ("Nexford" or the "Company") renewal tower for the policy period July 1, 2022 through July 1, 2023 (the "Renewal Tower"). The purpose of this review is to compare the final issued policy forms recei

II. Background A. Engagement Context Calderwood & Harkness LLP ("C&H") was engaged by Nexford Industrial Holdings Inc. to perform a comprehensive review of the Company's D&O and product-liability insurance tower in connection with the 2022-2023 renewal cycle. Nexford is a Delaware corporation headquartered at 2200 Corporate Center Drive, Suite 800, Schaumburg, Illinois 60173. The engagement was authorized pursuant to

1. Nexford Conveyor Systems, LLC — a Delaware limited liability company with its principal facility located at 4500 Industrial Parkway, Joliet, Illinois 60436. Nexford Conveyor Systems is engaged in the design, engineering, and manufacture of conveyor and material-handling systems for warehouse, distribution, and manufacturing facilities.

2. Triton Fastener Corp. — an Illinois corporation with its principal facility located at 1010 Whitman Avenue, Rockford, Illinois 61101. Triton Fastener is a producer of industrial fasteners, anchoring systems, and related hardware for construction and manufacturing applications.

3. Marlowe Asset Management Precision Machining, Inc. — an Ohio corporation with its principal facility located at 775 Summit Industrial Boulevard, Akron, Ohio 44311. Marlowe Asset Management Precision Machining provides precision CNC machining, fabrication, and assembly services for automotive, aerospace, and defense sector customers. For the fiscal year ended December 31, 2021, the Nexford group reported consolidat

III. Methodology The post-bind policy wording review was conducted in accordance with the following methodology: Step 1 — Receipt and Cataloging of Final Issued Policy Forms. We received final issued policy forms for all five layers of the D&O tower from Ashford Breckinridge LLP. The policies were transmitted by Tamara Fisk (Account Executive) via encrypted file transfer on the following dates: the Vandermeer primary

IV. Layer-by-Layer Review A. Primary Layer — Vandermeer National Insurance Company

1. Policy Identification The primary layer of the D&O tower is underwritten by Vandermeer National Insurance Company, a Connecticut-domiciled admitted carrier with an A.M. Best rating of A (Excellent), Financial Size Category XIII. The renewal policy is identified as follows: Carrier: Vandermeer National Insurance Company Policy Number: VNI-DO-2022-91205 (replacing outgoing policy VNI-DO-2021-88473) Policy Period: Ju

2. Named Insured Schedule We reviewed the Named Insured Schedule set forth in the declarations page and attached schedule of the issued Vandermeer primary policy. Our review confirmed the following: • Named Insured: Nexford Industrial Holdings Inc., 2200 Corporate Center Drive, Suite 800, Schaumburg, Illinois 60173. • Subsidiaries / Additional Named Insureds: Nexford Conveyor Systems, LLC; Triton Fastener Corp.; Marl

3. Insuring Agreements The Vandermeer primary policy contains three insuring agreements, which we reviewed in detail: Insuring Agreement A (Side-A — Non-Indemnifiable Loss): This insuring agreement provides coverage for Loss arising from Claims made against Insured Persons for Wrongful Acts when the Company has not indemnified, and is not permitted or required to indemnify, the Insured Person. This is the traditional

4. Definition of "Insured Person" The definition of "Insured Person" was identified in our Preliminary Coverage Gap Memorandum dated May 27, 2022 as a key area requiring attention during the renewal negotiation. Under the expiring Vandermeer primary policy (VNI-DO-2021-88473), the definition of "Insured Person" was limited to duly elected or appointed directors and duly appointed officers of the Company, which exclud

5. Definition of "Claim" — DISCREPANCY IDENTIFIED The definition of "Claim" is a critical provision in any D&O policy because it determines the scope of events that will trigger coverage. During the renewal negotiation, the definition of "Claim" was identified as one of the ten priority negotiation points (Negotiation Point No. 3 in the Negotiation Points Memorandum dated June 13, 2022). Specifically, C&H recommended

6. Severability of the Application Severability of the application was Negotiation Point No. 1 in the Negotiation Points Memorandum dated June 13, 2022. Full severability ensures that misrepresentations or omissions in the insurance application by one insured person are not imputed to other, "innocent" insured persons for purposes of rescission or voiding of coverage. Under the negotiated severability provision, only

7. Insured vs. Insured Exclusion The insured-versus-insured exclusion is a standard provision in D&O policies that bars coverage for Claims brought by one insured against another insured. This exclusion is particularly significant in Nexford's case because Veltrano Capital Partners holds 68.5% of the Company's equity and has appointed five of the nine members of the board of directors. Without appropriate carve-backs

8. Prior Acts / Prior and Pending Litigation Exclusion The prior acts and prior and pending litigation exclusion is a standard D&O policy provision that bars coverage for Claims arising out of, based upon, or attributable to facts, circumstances, or Wrongful Acts that occurred before the retroactive date stated in the policy, or that are the subject of litigation or proceedings pending or existing on or before a spec

9. Allocation Provisions Allocation provisions govern how defense costs, settlements, and judgments are allocated between covered and non-covered matters in mixed claims — i.e., Claims involving both insured and uninsured parties, or both covered and non-covered allegations. During the renewal negotiation (Negotiation Point No. 6), C&H recommended that Nexford negotiate "presumptive allocation" language favoring the

10. Priority of Payment / Order of Payments Provision The priority of payment provision (sometimes referred to as the "order of payments" provision) establishes the priority among competing claimants to the policy limits. This provision is particularly important in situations where the policy limits may be insufficient to cover all losses, as it determines whether individual directors and officers (natural persons) a

11. Other Endorsements We reviewed all endorsements attached to the issued Vandermeer primary policy (VNI-DO-2022-91205). The following endorsements were attached: • Endorsement No. 1: Named Insured Schedule (as reviewed in Section IV.A.2 above) • Endorsement No. 2: Self-Insured Retention Amendment (reflecting $1,000,000 SIR on entity coverage) • Endorsement No. 3: Broadened Insured Person Definition (as reviewed in

1. Policy Identification The first excess layer of the D&O tower is underwritten by Commonwealth Indemnity Group, a Pennsylvania-domiciled admitted carrier with an A.M. Best rating of A (Excellent), Financial Size Category XII. The renewal policy is identified as follows: Carrier: Commonwealth Indemnity Group Policy Number: CIG-XS-2022-74810 Policy Period: July 1, 2022 to July 1, 2023, 12:01 a.m. local time at the ad

2. Follow-Form Analysis The Commonwealth first excess policy follows form to the Vandermeer primary policy (VNI-DO-2022-91205), subject to specified differences set forth in the Commonwealth policy. Under the follow-form grant, Commonwealth adopts the terms, conditions, definitions, and exclusions of the underlying Vandermeer primary policy, except to the extent that the Commonwealth policy contains independent provi

3. Drop-Down Provisions The Commonwealth policy contains a standard drop-down provision providing that, upon exhaustion of the underlying Vandermeer primary limits by the payment of Loss, the Commonwealth policy will attach and respond to covered Claims as if it were the primary policy. We reviewed the drop-down language and confirmed that there is no gap between the Vandermeer primary limits ($10,000,000) and the Co

4. Definition Consistency We reviewed the key defined terms in the Commonwealth policy for consistency with the Vandermeer primary and across the tower. The definition of "Insured Person" in the Commonwealth policy follows form to the Vandermeer primary. We confirmed that the broadened "Insured Person" definition negotiated for the primary policy (including de facto officers, advisory board members, and outside capac

1. Policy Identification The second excess layer of the D&O tower is underwritten by Northfield Excess Insurance Company, a New York-domiciled admitted carrier with an A.M. Best rating of A- (Excellent), Financial Size Category XI. Northfield is a new carrier on the Nexford D&O tower, replacing Graystone Mutual Assurance Co. (domiciled in Ohio) on this layer. The carrier change was driven by Graystone's decision to e

2. Follow-Form Analysis The Northfield second excess policy follows form to the Vandermeer primary policy (VNI-DO-2022-91205), subject to specified differences set forth in the Northfield policy. Because Northfield is a new carrier on the Nexford D&O tower — replacing Graystone Mutual Assurance Co. — we gave particular attention to the follow-form grant and reviewed the issued policy carefully for any independent exc

3. Drop-Down and Erosion Provisions The Northfield policy contains appropriate drop-down and erosion provisions. Coverage attaches upon exhaustion of the aggregate underlying limits of $20,000,000 (comprising the Vandermeer primary and Commonwealth first excess layers) by the payment of Loss. We verified that there is no gap between the aggregate underlying limits and the Northfield attachment point. The drop-down me

4. Definition Consistency As with the Commonwealth first excess layer, the Northfield second excess policy follows form to the Vandermeer primary for all key definitions. We confirmed that the broadened "Insured Person" definition is adopted through the follow-form provision. However, the same "Claim" definition follow-through concern identified in connection with the Commonwealth policy applies to the Northfield pol

1. Policy Identification The third excess layer of the D&O tower is underwritten by Pinnacle Re Insurance Ltd., a Bermuda-domiciled insurer and reinsurer with an A.M. Best rating of A (Excellent), Financial Size Category XIV. Pinnacle Re is a well-established Bermuda market carrier with a significant presence in the U.S. D&O excess and surplus lines market. Carrier: Pinnacle Re Insurance Ltd. Domicile: Hamilton, Berm

2. Follow-Form Analysis The Pinnacle Re third excess policy follows form to the Vandermeer primary policy (VNI-DO-2022-91205). As a Bermuda-domiciled carrier, the Pinnacle Re policy includes certain provisions specific to Bermuda-form insurance, including a choice of law provision designating the laws of Bermuda as governing the policy (except to the extent that U.S. law governs the interpretation of specific terms i

3. Drop-Down and Erosion Provisions The Pinnacle Re policy contains appropriate drop-down and erosion provisions. Coverage attaches upon exhaustion of the aggregate underlying limits of $30,000,000 (comprising the three underlying layers) by the payment of Loss. We verified proper attachment and confirmed that there is no gap between the underlying aggregate limits and the Pinnacle Re attachment point. The drop-down

4. Definition Consistency Consistent with the analysis of the Commonwealth and Northfield excess layers above, the Pinnacle Re policy follows form to the Vandermeer primary for all key definitions. We confirmed that the broadened "Insured Person" definition is adopted through the follow-form provision. The same "Claim" definition follow-through concern applies: the narrowed "Claim" definition in the issued Vandermeer

1. Policy Identification The Side-A difference-in-conditions ("DIC") layer is underwritten by Harrington Specialty Insurance Co., a Delaware-domiciled surplus lines carrier with an A.M. Best rating of A+ (Superior), Financial Size Category XII. The Harrington Side-A DIC policy is a dedicated personal-liability protection policy for the individual directors and officers of Nexford and its subsidiaries, providing cover

2. Difference-in-Conditions Grants The Harrington Side-A DIC policy provides coverage for non-indemnifiable Loss incurred by individual Insured Persons in connection with Claims for Wrongful Acts, on a difference-in-conditions basis relative to the underlying D&O tower. The DIC grant is triggered under any of the following circumstances: (a) The underlying D&O tower denies or refuses to pay a covered Claim; (b) The u

3. Bankruptcy/Insolvency Response The Harrington Side-A DIC policy contains a robust bankruptcy and insolvency coverage provision, which was a critical feature identified in C&H's Side-A DIC Policy Analysis Memorandum dated June 3, 2022. This provision ensures that the Harrington policy will respond to provide coverage for non-indemnifiable Loss of individual directors and officers in the event that Nexford enters ba